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Covered bonds at Barcap

This entry was posted by Sam Jones on Friday, July 4th, 2008 at 11:33 and is filed under Capital markets. Tagged with barcap, rbs. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

1. Jul 08   23:58 Posted by RMBS españoles resistentes a sobresaltos, según Fitch - Burbuja Económica [report]

   […] Originalmente Escrito por ronald29780 Esto pasa por la inflacion. Post re-start del server. PD: ¿Alguien me puede explicar como se hace un stress test de un RMBS? FT Alphaville » Blog Archive » Covered bonds at Barcap Fitch Ratings has today assigned Barclays Bank Plc’s (Barclays - ‘AA’/Outlook Stable/’F1+’) first two benchmark mortgage covered bond issues of GBP1bn each, with a maturity of three and three and a half years, ‘AAA’ ratings. The ratings are based on Barclays’ Long-term Issuer Default Rating (IDR) of ‘AA’ and a Discontinuity Factor (D-Factor) of 10.8%, the combination of which enables the mortgage covered bonds to reach a ‘AAA’ rating. The ratings also take into account committed over-collateralisation (OC) between the cover assets and the covered bonds being sufficient to sustain ‘AAA’ stress scenarios applied by the agency. The collateral consists of first-charge, residential mortgage loans originated in England, Wales, Northern Ireland and Scotland by Barclays. As at 29 February 2008, the pool consisted of 29,012 loans totalling GBP3.58bn, with an average original loan-to-value ratio (LTV), based on the original loan balance and property value, of 55.54%. In a ‘AAA’ scenario, Fitch has calculated a cumulative weighted average frequency of foreclosure (WAFF) for the cover assets of 13.51% and a weighted average recovery rate (WARR) of 81.02%. The cover pool has reasonable geographical diversification, with the highest concentration in London, outer Metro and south-east UK (52.05%) and the remainder well spread across other UK areas. The nominal OC stands at 78.95%. The covered bonds benefit from a minimum level of 6.38% OC through the asset coverage test, whereby outstanding covered bonds cannot exceed 94% of the total cover pool. Comentario en el blog: As we’ve noted in the past, covered bonds could well be a sure way of getting nervous buyers back to the mortgage securitisation market. With a hefty 22% haircut on those zombie RMBS used in the SLS, surely a real market is the preferable option. Related links Still value in structured AAA - FT Alphaville Ahora hace falta algun iniciado para explicarnos todo esto. __________________ «¿Gulag? No conozco ningún gulag.». Iósif Stalin […]

2. Jul 04   13:34 Posted by Knocker [report]

   Hi Sam, thanks for the response, I see your argument.

   In Spain, there is still some RMBS issuance though the rules they operate under are quite different (I think the originator has to keep some of the tranches and hence risk), there has also been use of private placement covered bonds in the UK which has perhaps sneaked under the radar, though I don’t know how much of the slack in the UK mortgage funding market due to the effective closure of the RMBS market that the UK CB market is in a position to take up though several new CB issuers are looking to step up to the plate.

3. Jul 04   12:39 Posted by Sam Jones [report]

   Knocker - apologies if there is confusion. I am aware of the - stark - differences between MBS and covered bonds.

   What I am alluding too, though, is the fact that CB’s do offer a way to get the securitisation market moving again by appealing to the former buyers of MBS and coaxing them back into buying structured assets.

   As for that silly Xtrakter ABS report/data, it was merely a circuitous lede into the post

4. Jul 04   12:22 Posted by Knocker [report]

   Covered bonds and MBS are really quite different products and one should take care not to confuse them, for example, MBS the assets are off-balance sheet and CBs on balance sheet.

   Also the CBs are not in the ABS data you refer to in the article.